This really brings me back to my youthful UFOlogy days. I remember encountering the "MILAB" idea back in the day, and your exact objections to it, and being fascinated by it. The way psychology and culture intersect to create these shifting delusions is really interesting.

Personally, I can well imagine the CIA or some other clandestine organisation doing the whole "let's try to mind control people and make it look like aliens" thing like once or twice just for the lulz--stranger government plots have happened--but the idea that it was ever a common, widespread practice just doesn't work for the basic logistical reasons you outlined in the post. These supposed government conspiracies are always so competent that they never slip up in big, verifiable ways that would show up on the evening news, but so specifically incompetent that they keep giving the game away to amateur internet sleuths.